Milk production costs still not covered in Germany

The quarterly cost figures for Germany show that only 80% of production costs were covered in July 2018, while in April it was 78% and 88% in January. Production costs in July amounted to 43.28 cents; however, producers only received 34.56 cents for their product.
Milk prices and production costs are still far apart. These figures come from the German quarterly cost studies published by the Farm Economics and Rural Studies Office (BAL).

Johannes Pfaller, dairy farmer from southern Germany and European Milk Board (EMB) Executive Committee member, does not see any convergence of farm-gate milk prices and production costs in the medium term either. "Milk prices are far from covering our production costs. In addition, the costs of animal feed will rise in the coming winter due to drought-induced crop failures." It is therefore now even more important to lay down the conditions for a stable milk market as part of the Reform of the Common Agricultural Policy, Pfaller said.

Evolution of milk production costs in Germany
Here you have the evolution of milk production costs in Germany from 2009 to July 2018.

Price-cost ratio (shortfall)
The price-cost ratio illustrates to which degree milk prices cover production costs. In July 2018, producers only recovered 80% of their production costs from the milk price; the shortfall was thus 20%.
Here you see the cost shortfall since 2009.

Milk Marker Index (MMI)
The Milk Marker Index represents the evolution of milk production costs. In July 2018, the MMI was at 104, i.e. production costs for German dairy farmers had risen by 4% as compared to the base year 2010 (2010=100).
Here you see the evolution of the Milk Marker Index over time.

Production cost study for six key milk production countries
Cost calculations are regularly carried out in Germany and five other European countries as well. They also clearly show that milk producers are not paid cost-covering prices.New: The calculations of milk production costs in Belgium, Denmark, France, Germany, Luxembourg and the Netherlands for 2017 are now available. You can find the study here as well as the figures at a glance in a short video.

There is a chronic shortfall in milk production cost coverage – how can this be solved?
The European Milk Board promotes a legally-anchored crisis instrument to counteract the chronic cost shortfall. The Market Responsibility Programme (MRP) observes and reacts to market signals by aligning production.Here you have a short description of the EMB Market Responsibility Programme.